New Jersey residential real estate contracts generally include a closing date and most Buyers and Sellers believe that the contract closing date is a firm date and that the closing will definitely take place on that date. However, in New Jersey, the closing date is not essential to the terms of the contract and, therefore, not binding meaning that either party may request, and must be granted, an extension of the closing date. As we tell our clients, the closing date is not an exact date but rather an “on or about” date.
For a closing date to be made exact or binding, the parties must agree to what is called a “time of essence” closing date. It is unlikely that the attorney for either party would agree to a binding closing date, as there are too many circumstances out of the control of the parties and attorneys that could delay the closing date. Examples of normal delays include delays from a Buyer’s lender, an unexpected title issue or lien that the Seller must clear-up prior to closing, illness of a party, and issues with a municipality issuing a Certificate of Occupancy. If time is of the essence and the closing does not take place on the contract closing date, the party delaying the closing would technically be in breach of the contract and subject to liability.
Since most attorneys do not agree to make the contract closing date binding, what happens if one party refuses to close on that date and the other party does not want to extend the closing date? Once the contract closing date passes, the party who is ready and willing to close can set a new, binding date for the closing by serving the other party with a “time of essence” letter that comports with requirements set forth in the contract. The extended date is generally 10 to 14 days after the notice is provided. The new date will contractually obligate the other party to close on that date or be in breach of contract. If the non-declaring party still does not close by the date set forth under “time is of the essence,” the party serving the letter can pursue legal action against the other party.
Date: March 27, 2023